• Mar
  • 13
  • 2012

Notice u/s 143(2) mandatory for validating reassessment proceedings

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Hon’ble Delhi High Court that in the case of C.I.T. vs. Pawan Kumar Gupta (2009) 318 ITR 322 (Del.) in the context of issue of notice u/s 143(2) in block assessment, which are in pari materia to proceedings u/s. 148, wherein it has held that section 143(2) is a mandatory provision whether one looks at it from the standpoint of a regular assessment or from the standpoint of an assessment under Chapter XIVB. Section 143(2) has no application in a situation where the Assessing Officer, on receipt of the return of undisclosed income in the Form No. 2B from the assessee, is satisfied with the same as reflecting the true state of affairs then it is not necessary for him to embark upon any further enquiry or investigation but where the Assessing Officer is not inclined to accept the return of undisclosed income filed by the assessee, the procedure in section 143(2) has to be followed. If an assessment order is passed in such a situation without issuing a notice u/s. 143(2), it would be invalid and not merely irregular. On the anvil of the aforesaid jurisdictional High Court decision, in our considered opinion, a notice u/s 143(2) is mandatory for validating the reassessment proceedings. In the present case, it is not clear that where the notice was issued and served upon the assessee or not, as Ld. Commissioner of Income Tax (Appeals) has not clearly given a finding as to whether notice u/s. 143(2) was issued or not.

INCOME TAX APPELLATE TRIBUNAL, DELHI

I.T.A. No. 6092/Del/2010 – A.Y.: 2003-04

Smt. Madhulika Choudhary Vs. Income Tax Officer

ORDER

PER SHAMIM YAHYA: AM

This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals) dated 07.10.2010 pertaining to assessment year 2003-04.

2. The first issue raised is that Ld. Commissioner of Income Tax (Appeals) erred both on facts and in law in upholding the reassessment proceedings initiated by the Assessing Officer u/s. 147/148 of the Act.

3. On this issue, ld. counsel of the assessee has averred that notice u/s. 143(2) was not issued and served on the assessee and in this view of the mater, the valid of jurisdiction has not been assumed  in this case. This aspect was also raised before the Ld. Commissioner of Income Tax (Appeals). Ld. Commissioner of Income Tax (Appeals) has dealt with the issue as under:-

“I have carefully considered the various arguments raised by the appellant and also the material brought on record by the Assessing Officer. On the issue of notice u/s. 143(2), I have called for and examined the case records of the Assessing Officer. I find that the notice dated 10.10.2007, along with questionnaire, is a notice u/s. 142(1) of the Act. However, notice u/s 142(1) and notice u/s. 143(2) both dated 13.11.2007 are available in the file. Postal acknowledgement of dispatch on 14.11.2007 is also available and the order sheet shows entry on 13.11.2007 which reads as under “Show cause notice issued fixing the case for 19.11.2007 alongwith notice u/s. 143(2).” However, it has been argued by the appellant that she has received only notices u/s 142(1) and in view of the judgement of the Special Bench of the Delhi, ITAT, the assessment is farmed without jurisdiction. I have carefully gone through the judgement of the Special Bench of the Delhi ITAT in the case of Raj Kumar Chawla vs. ITO at 94 ITD.

1. The said judgment has been rendered in the context of a case where notice u/s. 143(2) was not issued without the prescribed period of 12 months and hence the proceedings were held to be time barred. It was held by the ld. court that if notice u/s. 143(2) was not served within the period prescribed by the proviso to section 143(2), the return filed will be deemed to be accepted. It was held that the purpose of the proviso is only to make the assessee aware that his assessment is going to be taken or not under scrutiny. In the facts of the case considered by the Special Bench of the Delhi ITAT, notice u/s. 143(2) was issued more than 12 months after the filing of return in response to notice u/s. 148. The Court held that provisions of limitations are to be strictly construed, and therefore no assessment could be made u/s. 147 when the notice u/s. 143(2) had not been issued within 12 months form the date of filing of the return. It can be seen that the facts of the present case are quite distinct. Even if it is accepted that the appellant did not receive the notice u/s. 14392) dated 13.11.2002, even then there is no question of the proceedings being bared by limitation as even the assessment order has been passed within 12 months from the date of filing of the return. Moreover, the appellant has been represented, through her authorized representative, on not less than 4 occasions before completion of the assessment proceedings and therefore ample opportunities were granted, undoubtedly within 12 months from the date of filing of the return. The appellant has also not raised these objections before the Assessing Officer but has attended before the Assessing Officer on several occasions. The Madras High Court in the case of Areva T&D India Ltd. vs. ACIT (294 ITR 233) has held that where the assessee has participated in reassessment proceedings, the failure to issue notice u/s. 143(2) will render the reassessment order not void but irregular. In that case, the matter was remitted to the Assessing Officer. Once the assessee has participated in the proceedings, the doctrine of waiver or acquiescence is attracted. As the appellant has participated in the proceedings initiated by the Assessing Officer, then later there can be no complaint of lack of jurisdiction. The waiver has to be inferred from such an action. The purpose of section 143(2) is to allow the appellant an opportunity of being heard. Allowing the opportunity of being heard, however, without issue of notice u/s. 143(2), would amount to an irregularity, but not an illegality. Considering all these fats, I hold that the appellant’s arguments in this connection are misplaced and there has been a valid assumption of jurisdiction by the Assessing Officer, to assess the income u/s. 147 of the Act.”

4. Against the above order the assessee is in appeal before us.

5. Ld. counsel of the assessee submitted that the notice u/s 143(2) of the Act is required to assume valid jurisdiction. He claimed that in this case notice u/s 142(1) of the Act dated 10.10.2007 alongwith necessary questionnaire was issued and served upon the assessee and thereafter, another notice u/s 142(1) dated 13.11.2007 was issued and served upon the assessee and no notice u/s. 143(2) was ever served upon the assessee. In this regard, ld. counsel of the assessee has relied upon the catena of case laws for the proposition that the reassessment proceedings are invalid without a valid notice u/s. 143(2).

5.1 We have heard both the counsel and perused the records. We find in this case that Ld. Commissioner of Income Tax (Appeals) in his appellate order has noted that notice u/s 142(1) and 143(2) both dated 13.11.2007 are available in the file. Furthermore, he has noted that the postal acknowledgement of dispatch dated 14.11.2007 is also available. He has further noted that order sheet shows entry on 13.11.2007 which reads as under “Show cause notice issued fixing the case for 19.11.2007 alongwith notice u/s. 143(2).” This aspect was vehemently contested by the assessee. Ld. counsel of the assessee claimed that only notice u/s 142(1) was received and no notice u/s 143(2) was received. We find that Ld. Commissioner of Income Tax (Appeals) has further held that even if it is accepted that the assessee did not receive the notice u/s 143(2) dated 13.11.2007, even then there is no question of the proceedings being barred by limitation as even then assessment order has been passed within 12 months from the date of filing of the return. He has further noted that moreover, the assessee has been represented, through her authorized representative, on not less than 4 occasions before completion of the assessment proceedings and therefore ample opportunities were granted, undoubtedly within 12 months from the date of filing of the return. It was further noted that assessee has also not raised these objections before the Assessing Officer but has attended before the Assessing Officer on several occasions. Ld. Commissioner of Income Tax (Appeals) has further referred the decision of the Hon’ble Madras High Court in the case of Areva T&D India Ltd. vs. ACIT (294 ITR 233) wherein it has been held that where the assessee has participated in reassessment proceedings, the failure to issue notice u/s. 143(2) will render the reassessment order not void but irregular. In that case, the matter was remitted to the Assessing Officer. Ld. counsel of the assessee in this regard has contested the finding of the Ld. Commissioner of Income Tax (Appeals). He referred to the case law of the Hon’ble Delhi High Court that in the case of C.I.T. vs. Pawan Kumar Gupta (2009) 318 ITR 322 (Del.) in the context of issue of notice u/s 143(2) in block assessment, which are in pari materia to proceedings u/s. 148, wherein it has held that section 143(2) is a mandatory provision whether one looks at it from the standpoint of a regular assessment or from the standpoint of an assessment under Chapter XIVB. Section 143(2) has no application in a situation where the Assessing Officer, on receipt of the return of undisclosed income in the Form No. 2B from the assessee, is satisfied with the same as reflecting the true state of affairs then it is not necessary for him to embark upon any further enquiry or investigation but where the Assessing Officer is not inclined to accept the return of undisclosed income filed by the assessee, the procedure in section 143(2) has to be followed. If an assessment order is passed in such a situation without issuing a notice u/s. 143(2), it would be invalid and not merely irregular. On the anvil of the aforesaid jurisdictional High Court decision, in our considered opinion, a notice u/s 143(2) is mandatory for validating the reassessment proceedings. In the present case, it is not clear that where the notice was issued and served upon the assessee or not, as Ld. Commissioner of Income Tax (Appeals) has not clearly given a finding as to whether notice u/s. 143(2) was issued or not. We have carefully considered the submission and perused the records. Both the counsel fairly agreed that in the interest of justice, the matter needs to be remitted to the file of the Assessing Officer to consider the issue afresh. Accordingly, the issue stands remitted to the file of the Assessing Officer to consider the same afresh. Needless to add that the assessee should be given adequate opportunity of being heard.

6. In the result, the appeal filed by the assessee stands allowed for statistical purposes.

Order pronounced in the open court on 01/3/2012.


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